A delay in your retirement plan doesn't mean you have to wait to save.

Note from Sarah Catherine: This is a great piece that Aptus Financial Coach Mary Tellez wrote after helping with enrollments on retirement plans. Waiting periods are inevitable for some companies, but employees need to understand the behavioral challenge they are up against. This is a very simple to understand argument for simulating a retirement plan while in a waiting period for your company to start one.

Did you just start a new job with benefits?  Congratulations!  Did you read the fine print?  What are the eligibility requirements?  How long do you have to work there before you can participate in their retirement plan? 

It’s not uncommon to have to work at a new job for one year before you can start making contributions.  For most people, that year will look like this:  Let’s say your job pays $50,000 a year.  After taxes, that looks something like $3,000/month.  You make decisions with that number in mind: car, house, utilities/apps, savings, etc.  You establish a certain lifestyle that remarkably costs $3000.  Coincidental? No. Convenient? Yes. Your one-year work anniversary rolls around, and you know you need to save at least 10% into your retirement plan, but when you crunch the numbers you start to feel some buyer’s remorse.  That 10% is $417/month.  That’s a car payment.  That’s no small thing to absorb into your life.  That requires some shifting and discomfort to work that in.  You opt for a smaller percentage (which is a great first step), but you know in your heart that you’ll have to play catchup at some point.   

I know from personal experience that that is so much easier said than done. 

Here’s another scenario.  Same job.  Same pay.  Same timeline.  Before you receive your first paycheck, you set up a savings account.  Pro tip: open this account at a bank other than the one where you have  your primary checking account—this will reduce ease of access.  You’ve heard about the importance of saving for emergencies?  Now’s your chance.  Before your first paycheck arrives, check with HR to see if it’s possible to payroll deduct into multiple accounts (checking and savings).  You fill out the paperwork and direct that $417/month into a savings account.  You never even see it.  It’s automatic.  While you wait for your year to finish, your emergency fund fills up to the tune of $5,000.  And you never lived on that $417.  You don’t need that to support your lifestyle.  When your anniversary date rolls around, you transition the funds that were filling up an emergency fund into a retirement fund.  There’s no adjustment or discomfort as you say goodbye to creature comforts for the sake of your future self.   

 If your job doesn’t offer payroll deductions into multiple accounts, most banks offer automatic transfers.  If your savings and checking accounts are at the same institution, have an automatic transfer scheduled for 1-2 days after you get paid to fund your emergency savings. 

 You may also be in a situation where you will never be eligible to participate in a company’s retirement plan.  Let’s say you work part-time and won’t ever meet the hours’ requirement of the plan.  While it does require a little more legwork on your part, all of this can still apply to you.  For the first year or so, fund a savings account for emergencies.  Once you have established that, set up your own retirement account and fund that every time you get paid.   

More work?  Maybe a little.  Totally worth it in the long run?  Absolutely.